Shares of Marathon Petroleum Corp (NYSE:MPC) rose as high as 10.81%, after its sponsored Master Limited Partnership (MLP) MPLX LP (NYSE:MPLX) announced that it will acquire Markwest Energy Partners LP (NYSE:MWE) in a deal which is expected to result in the formation of the fourth-largest American MLP with a $21 billion market capitalization. MPC will contribute $675 million in cash, as part of the deal, which involves paying MWE shareholders 1.09 shares of MPLX and a $3.37 in cash per share. In return, the resulting firm which will have Markwest as a fully-owned subsidiary, will have significantly more assets in the midstream component of the natural gas industry. “This combination is a significant step in executing MPC’s strategy to grow its higher-valued, stable cash flow midstream business, by transforming MPLX into a large-cap, diversified master limited partnership,” MPC President and Chief Executive Officer Gary R. Heminger said in a statement.
It’s important to note, however, that the upbeat outlook of Marathon Petroleum Corp (NYSE:MPC) on the MPLX LP (NYSE:MPLX) and Markwest Energy Partners LP (NYSE:MWE) merger is opposed to the hedge fund sentiment on MPC by the end of the first quarter. Though 46 hedge funds tracked by Insider Monkey held long positions in MPC by March 31, up by 2% from one quarter earlier, the total holdings value decreased by 4.93% to $2.89 billion. This is despite the stock gaining 13.45% in the first quarter.
Let’s first take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research, we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand, the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith in large-cap stocks. In forward tests since August 2012, these top small-cap stocks beat the market by an impressive 84 percentage points, returning over 135% (read the details here). Hence, a retail investor needs to isolate himself from the herd and take advantage of the best growth opportunities in the market by concentrating on small-cap stocks.
Insider Monkey also follows insider transactions to see whether insiders are bullish on a company. In this way, Steven Davis, director at Marathon Petroleum Corp acquired 3,500 shares of the firm on March 13, but Senior Vice President Pamela Beall disposed of 26,673 shares on June 2. Considering these, let’s appraise the fresh activity concerning Marathon Petroleum Corp.
What have hedge funds been doing with Marathon Petroleum Corp (NYSE:MPC)?
When looking at the hedgies followed by Insider Monkey, D.E. Shaw & Co., L.P., managed by David E. Shaw, holds the biggest position in Marathon Petroleum Corp (NYSE:MPC), which contains 7.72 million shares, comprising 1.2% of its 13F portfolio. On the second spot is Cliff Asness’ AQR Capital Management with 2.58 million shares. Other members of the smart money that are bullish on the company include Israel Englander’s Millennium Management, Alan Fournier’s Pennant Capital Management and John Griffin’s Blue Ridge Capital.
In addition, several investors initiated stakes in the company, including Renaissance Technologies, managed by Jim Simons, which added the most valuable holding in Marathon Petroleum Corp (NYSE:MPC), holding a $58.7 million stake, with 573,117 shares at the end of March. On the opposite end of the spectrum, Benjamin A. Smith’s Laurion Capital Management closed its ‘Call’ stake that contained options underlying 1.1 million shares, and still holds 32,600 shares.
In this way, as hedge funds remain bearish on Marathon Petroleum Corporation, we don’t recommend buying shares of the company at the moment.
Disclosure: None
